21 April 2019
Italian soccer star Gianluigi Buffon is much better at defending the goal than protecting his investment. Photo: Reuters
Italian soccer star Gianluigi Buffon is much better at defending the goal than protecting his investment. Photo: Reuters

Investment lessons from Italian goalkeeper Buffon

The 38-year-old Italian soccer star Gianluigi Buffon is regarded as one of the world’s best goalkeepers. However, it seems he is much better at defending the goal than protecting his investment.

He made the same mistake that billionaire investor Warren Buffett committed in 1962. Both of them placed heavy bets on a textile company.

Buffon started to invest in Milan-listed Zucchi in 2009, initially spending 1.8 million euros (US$2 million) for a 2 percent stake.

Zucchi started as a family business with around 1,000 workers. It became known for its exquisite craftsmanship.

However, its share price plunged almost 80 percent within two years after Buffon made his investment, from 0.5 euro to 0.1 euro.

Buffon suffered a loss of HK$12 million, which accounted for one-third of his annual salary.

But instead of cutting his losses, the soccer star increased his shareholding to 19 percent, investing another HK$150 million and joining the board of directors of the firm.

In the meantime, Zucchi was struggling with falling revenue and share price.

Its biggest shareholder sold its shares to Buffon, making him the biggest shareholder in 2014 with a stake of 56.3 percent.

It’s estimated that he had invested around HK$500 million. The investment has eaten up all his wealth made through two decades of soccer career.

Both Buffon and Buffett became the boss of the company they invested in. However, Buffett was able to turn Berkshire into his investment flagship, while Buffon as a professional soccer player failed to turn Zucchi around.

Apart from investing all his money, Buffon even volunteered to provide guarantee for Zucchi’s millions of euros of debt.

In order to prevent bankruptcy, Zucchi was acquired by a French investment fund, Astrance Capital, under an agreement to restructure its debt.

As a result, Buffon’s stake in the firm was reduced to 15 percent, equivalent to only HK$11.6 million at the share’s closing price of 0.0225 euro on Monday.

Buffon has lost almost all of his investment, and faced a huge debt as well.

The late investment analyst Cho Yan-chiu, better known as Cho Sir, always said, “Cut your losses but do not cut your profits”. He also warned: “Don’t fall in love with stocks.”

Buffon went the opposite way. He had so much confidence in himself since he had made a lot of money from stock investments in his 20s.

It was patriotism and a determination to help the Italian industry that propelled Buffon to invest so much money.

He viewed Zucchi as a piece of Italy’s economy, and said that if he did not save the firm, more than 1,000 workers would lose their jobs and 1,000 families would face financial difficulties.

Nevertheless, the Italian goalkeeper has just renewed his contract with Juventus until 2018.

Hopefully, he could save enough capital and be a game changer for the troubled company.

This article appeared in the Hong Kong Economic Journal on July 6.

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist

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